EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 14, Problem 2SP
To determine
Describe the reason for hiring additional worker under the given situation.
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What effect will a reduction in commodity price have on the input demand curve of the firm
Suppose Fred produces 500 litres of milk every day with 10 workers. The price of milk is $12 per litre, and each worker is paid $550 daily.
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If Fred buys more dairy cattles, how will it affect his demand for labor? Explain with a diagram.
Will decrea
n he fong run, assume a firm uses both labor and capital to produce 25 units of output. The marginal
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employed is 500. The wage rate of labor is $10. If the firm is minimizing the cost of producing 25 units of
output, what must be the unit price of capital?
Chapter 14 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- Ginny currently earns a (a. nominal; b. real) wage of $12.00 per hour; in other words, the amount of her paycheck each week is $12.00 per hour times the number of hours she works. Suppose the price of sparkling water is $2.00 per gallon; in this case, Ginny's (a. real; b. nominal) wage, in terms of the amount of sparkling water she can buy with her paycheck, is (blank) gallons of sparkling water per hour. When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on a (a. nominal; b. real) wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's (a. real; b. nominal) wage is (a. lower; b. higher) than both the worker and employer expected when they agreed to the wage. Ginny and her employer both expected inflation to be 3% between 2012 and 2013, so they agreed, in a two-year contract, that she…arrow_forwardWhy the answer is 4 hours?arrow_forwardIf the demand for soccer tickets increases, why would an economist expect the salaries of soccer players to increase? because of the reduction in the supply of world-class soccer players because of the demand for an input being a derived demand because of the change in the opportunity cost of building new stadiums because of the principle of diminishing marginal productarrow_forward
- Question What will be the demand of inputs when the input price depends on the demandarrow_forwardA manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. If the marginal product of labor is 60 units of output per hour and the marginal product of capital is 45 units of output per hour, is the firm using the cost-minimizing combination of labor and capital? If not, should the firm increase or decrease the amount of capital used in its production process?arrow_forwardArgue using a graph that the elasticity of substitution for a linear production function, f(1, k) = al + bk, is infinite. Hint: dividing by something really small makes the quotient really big.arrow_forward
- A5Charlie's Umbrellas has a production function given by Q = L^0.5K^0.5. The wage (W) is $80 per day and the rental per unit of capital (R) is $5 per day. In the long run, how many units of capital will Charlie want to buy for each unit of labor?arrow_forwardCalculate the elasticity of substitution for the production functionarrow_forwardWhy does the marginal product of labor start to decrease after a certain number of workers are hired? What makes the difference? a) The variable input continues to increase while the fixed input is fixed. b) Both the variable and the fixed inputs are increasing at the same rate. is it a or b?arrow_forward
- Given the production function y= f(x1,x2)=x11/3x21/3. The amount of x2 is equal to 216 in the short run. Calculate the factor demand function Given the product price (P) is 6 and the price of factor 1 (w1) is 12, calculate the optimum amount of factor 1. Show your results on a graph. What will happen to the optimum level of factor 1 when both the price of the good and the price of factor 1 increase simultaneously?arrow_forwardThe marginal product of a machine is 10 units of output per hour. The marginal product of labor is 6 units of output per hour. The rental rate of a machine is $4 per hour The hourly wage rate is $3 Is this firm minimizing its cost? Explain why or why not, and if not, which input should they switch towards and why?arrow_forwardSuppose that Linda receives a fixed payment of $50 and consumes 8 hours of leisure. If her total earnings for the entire day is $300, we know her hourly wage rate must be (there are 24 hours in a day)arrow_forward
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